Question

1. Define Par Value, Maturity Value, Maturity date, Coupon Payment, Coupon interest rate

2. Define floating rate bond, zero-coupon bond, Convertible bond, Income Bond

3. Define Premium bond, Discount bond, Current yield, Yield to Maturity, and yield to call

Answer 1

Par value- par value refer to the amount that appears on bond certificates.

Maturity Value-Maturity value is the amount which is payable to the person who i holding a financial obligation.

Maturity date-It refers to the date on which the principal ans interest associated with a debt security must be repaid to the holder in its entity.

Coupon payment-A coupon payment is the annual interest payment paid to the bond holder by the bond issuer until the debt instrument matures.

Coupon interest rate-It is the rate of interest paid by bond issuer on the bond"s face value(par value).It is the periodic interest rate and it calculated on bond face value,not on the market value.

Floating rate bond-It"s also known as floating rate notes,are a type of bond characterized by floating rate of interest.they also called floaters.

zero coupon bond-It is a dept security instrument that dose not pay interest.these bond trade at a deep discounts,offering full face value profits at maturity.The difference between the purchase price of a zero coupon bond and the par value ,indicates the investor"s return.

Convertible bond-These bond give the investor ,the option of exchanging the bond for a certain amount of common stock in the company,or the amount of the money that is equal to the stock's value.

Income bond-It is a type of dept security in which only the face value of bond is promised to be paid to the investor,with any coupon payments paid only if the issuing company has enough earnings to pay for a coupon payments.

Premium bond-A bond that is trading above its par value in the secondary market.A bond will trade at a premium when it offer a coupon rate that is higher than the current prevailling interest rate being offered for new bonds.

Discount bond-Bonds that trade at a value less than face value.

Current yield-this is the annual return earned on that price paid for a bond.It is calculated by dividing the bond''s coupon rate by its purchase price.

Yield to maturity-The total annual return on a bond investment if held to maturity.

Yield to call-It represent the return that one would earn if they held a note or bond until its call date before the debt instrument matures.